2013-05-08

what’s in a word?

Talking about risk is difficult. One reason is that we use the same term differently in different contexts.

Technically, risk can be seen as the quantified potential consequences of uncertainty. Such consequences can be good or bad, with respect to our objectives. After all, doing business is about taking risk. An investor will have a certain appetite for risk.

In everyday life, we talk about the risk for rain and we’re not referring to potential consequences as much as the likelihood that it will, in fact, rain.

Both interpretations are fine, as long as we recognize the difference.